The decision to change an existing medical billing model really should not be taken lightly. Even the best case scenario involving a change to/from an in-house or outsourced medical billing model calls for some extent of short-term income disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s first step would be to determine if his/her current medical billing model is having the desired financial result. Although financial analysis is beyond the scope of the discussion, the provider, accountant or other financial professional must be able to compare actual financial data to revenue and operating budgets. Assuming the integrity from the practice’s financial details are intact though accurate and timely data entry, the provider’s medical billing software should hold the capability of generating actionable management reports.
In the end, basic financial analysis will shed light on the good and bad points of the provider’s medical billing model. Some things to consider when looking for a medical billing model: the inherent weaknesses and strengths of on-site and outsourced medical billing models; the provider’s practice management experience & management style; the local labor pool; and medical billing related operating costs.
On-site versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Think about the on-site medical billing model. Approximately one third of independent medical care practices utilizing an on-site medical billing model experience income issues which range from periodic to persistent. The degree of action essental to a provider to resolve his/her cash flow issues may range from a basic adjustment (adding staffing hours) to a complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider having an under performing in-house medical billing model features a clear advantage over the provider having an under performing outsourced (also referred to as third party) medical billing model: proximity. An in-house medical billing model is within walking distance. A provider has the opportunity to observe, assess and address – notice the process, evaluate the system’s strengths and weaknesses and address issues before they become full blown problems.
Consider the provider having an outsourced medical billing model. The relatively low entry barriers from the third party medical billing industry have triggered a proliferation of medical billing services scattered throughout the United States. Chances are the provider’s medical billing service is situated in another geographic area making first hand observations and assessments impossible.
The role of management reporting in a alternative party medical billing model is critical. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cash flow is correctly managed. A report as basic as 30, 60, 90 days in receivables will quickly offer a provider a good idea of methods well their medical billing and account receivable processes are being managed by a 3rd party medical billing service.
A common mistake for most providers with the outsourced medical billing model would be to gauge the strength of the process in the very temporary, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cash flow position by maintaining mental tabs on the checks they received this week versus the prior week or if perhaps they deposited just as much money this month as recently. Unfortunately once a weakened cashflow receives the provider’s attention a lot larger problem might be looming.
What can cause a slow down in cash flow inside the outsourced medical billing model? By far the most commonly cited scenario is absence of follow up on the part of the medical billing service. Why? Like any other business, medical billing companies are concerned first of all with their own income.
A billing company generates 99.99% with their revenues on the front-end of the billing process – the info entry procedure that generates claims. Billing businesses that devote almost all of their manpower to data entry is going to be understaffed on the back end in the billing process – the follow up on unpaid claims. Why? Every hour of data entry generates an extra one to two hours of claim followup. Unfortunately for the provider, a billing company that ignores will not devote enough manpower for the diligent follow-up of 30, 60, 90 days in receivables often means the main difference between a provider making a profit or suffering a loss during any given time.
Practice Management Experience & Management Style
Providers with practice management experience should be able to effectively manage or recognize and resolve a problem with his/her billing process prior to the income crunch gets out of hand. On the other hand, providers with hardly any practice management experience will more likely allow his/her cashflow to arrive at a vital stage before addressing or perhaps recognizing an issue even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement a completely different billing model will be based to a great extent on his/her management style – some providers cannot fathom having their billing staff from sight or ear shot while other providers are completely at ease with turning their billing process to a third party service.
Local Labor Pool
Whether a provider chooses an in-house or outsourced billing model, a successful medical billing process remains contingent on the people associated with executing the medical billing process. On the side note, choosing office staff to have an in house model is a lot like choosing a 3rd party billing company. Whatever the model, a provider may wish to interview the potential candidates or even an account executive of the third party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers having an on-site model must depend on their human resource and management techniques to bring in, train and retain qualified candidates from the local labor pool. Providers with practices located in areas lacking qualified candidates or with no desire to get caught up with human resource or management responsibilities may have hardly any other choice but to select an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. In an on-site model, expenses related to the billing process range from the web access utilized to transmit claims to the workplace space occupied through the billing staff.
The most effective way to control billing costs is for the provider to consider the sum of those costs as being a amount of the practice’s revenues. The provider’s accounting software should enable him/her to classify and track billing related costs. When the billing related pricing is identified, dividing the amount of the expense by total revenues will convert the expense to your portion of revenues.
The exercise of converting billing related expenses to a percentage of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune using the billing related costs in the practice; 2) offers a grounds for more in depth research into the practice’s cost and revenue components; and three) provides for easy comparison between the cost impact of the in house versus outsourced models.
The price of an outsourced model is fairly straight forward. Since the fees of the vast majority of outsourcing services look like a portion of a provider’s revenues, the annualized expense of the medical billing service’s fees will be a fairly close approximation from the provider’s billing related costs with this model.
In the event that a provider is considering an outsourced model, he/she should remember that this model is not necessarily the silver bullet to ending all billing related costs and headaches these services fxbgil to promote. True the billing company will acquire a few of the expenses associated with the procedure nevertheless the provider will still need staff to act as the intermediary involving the provider’s office and billing service, i.e. a person to transmit data towards the billing service.
Costs will further increase for that provider if the billing service charges extra fees for add-on services such as online access to practice data, practice management software, management reports, handling patient inquiries, etc. The actual expense of the service will increase much more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.
To sum up, the provider must carefully weigh the advantages and disadvantages of each model before making a decision. In the event the provider is not really comfortable or experienced analyzing financial data he/she must enlist the expertise of an accountant or other financial professional. A provider must understand the expenses along with the inherent pros and cons of each billing model.
Providers employing an on-site model need to understand the actual cost of their process. Determining the actual cost not merely requires accurate financial data and accounting but an objective evaluation from the aspects of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may bring about the look of a low cost of ownership but those shortcomings could eventually produce a loss in revenues.
In case a provider is set to utilize a 3rd party billing service, he/she should invest time to thoroughly familiarize him/herself using the outsourcing industry before interviewing prospective billing services. The provider must understand the hidden expenses related to the outsourced model to make an educated decision.